Italian managers rise to the fundraising challenge

By: James Norris | 10 Jan 2012

The eurozone debt crisis has put a risk premium on investments in Italy but investors who have switched to other markets for reasons of safety may be missing a trick.

Political and economic factors loom large in any investment decision ­concerning Italy, adding a ­significant risk premium. A measure of the ­difficulty the industry faces is that in 2011 inward investment dried up completely, with international investors preferring instead to place their investments in safer markets, such as Germany and ­Scandinavia.

Foreign investors in Italian ­private equity have been conditioned by a number of key events, says Erwin Roex, partner at Coller Capital. “Of critical importance has been their experience with some of Italy’s better-known general partner [GP, fund manager] names, notably Investitori Associati and B&S Private Equity.

“Both firms have a large number of foreign limited partners [LP, ­investors] and in both instances, there have been negotiations around a reset of GP economics – a ­consequence of the GPs being unable to raise new funds as a result of poor performance.”

In the case of B&S, the ­negotiations were such that they triggered the ­no-fault divorce clause to remove B&S as manager of the portfolio, says Roex. Negotiations are under way, with rival mid-market private equity group Synergo SGR to take over as GP of the €500m B&S portfolio, according to press reports. Paolo Zapparoli, chief executive of Synergo, was unable to comment but confirmed that he expected to meet the fundraising target of €300m for his second fund, Sinergia II, soon.

“Add to all this,” says Roex, “the removal of the GP of the CAPE funds by the Italian regulator for suspected fraud, and the fact that a more recent favourite of the foreign LP ­community is having serious issues in its portfolio, and it is easy to ­understand why Italian GPs will have to rely mainly on local funding for the foreseeable future.”

Michele ­Semenzato, founding partner of WISE Sgr, says: “Paradoxically, those firms that have worked hard to bring on board international ­investors are now the ones suffering the most, as these investors have withdrawn to other markets.”

OUT OF THE SHADOWS

Giuseppe Salamone (pictured), associate ­investment director at Greenpark Capital, a mid-market private equity secondaries firm, says the austerity measures introduced by prime minister Mario Monti recently have been welcome, but the macroeconomic problems will “continue to cast a long shadow over the Italian economy”.